Would you operate your business differently if it made your company more resilient, innovative and responsive? Your answer would likely be yes, sure I would.
If operating differently made your company less efficient would you do it? Your answer would likely be no, not sure I would.
Your skepticism is well-founded. Running less efficiently is contrary to how we have been taught and trained. Roger Martin writes in When More is Not Better: Overcoming America’s Obsession with Economic Efficiency that while efficiency is an important goal it creates a high degree of specialization and rigidity in companies. The tradeoff of increasing efficiency is decreasing resilience, the company’s ability to withstand shocks and changes in the marketplace. Like the pandemic.
Efficiency went out the window when Coronavirus swept into our companies.
Supply chains broke, distancing wreaked havoc with workflows and government and health regulations took time and attention away from our businesses. Efficiency became elusive. Remote, social distancing and digitalization, to name a few, has changed how we work and where we work. So, this may be the perfect time to rethink efficiency and its long-held beliefs and accepted norms. Let’s start with the definition of efficiency. Peak productivity with minimum waste and expense.
Efficiency is a business need.
Efficiency is important to the company. Specifically, to its bottom line and to shareholder value. Efficiency is a fantastic way to measure machine performance. But here is the problem with a relentless focus on efficiency. Peak performance output with minimal input reduces your company’s responsiveness to changes in market conditions and, to customers’ and employees’ needs. Highly efficient systems are so finely tuned that they become brittle and break under the weight of change. Your efficiency advantage is wiped out by a virus.
Perversely, peak efficiency can lead to market inefficiencies. Peak efficiency with minimum input can lead to a “good enough” culture that commoditizes your product and reduces competitive advantage to volume and lower prices. Of course, customers want a good price. But, if your focus is costs and minimal inputs expect your customer to focus on cost too and demand increasingly better pricing. This leads to more promotion, more discounts, free shipping, whatever gets the deal.
The last word goes to Jim Hackett, former CEO of Ford, “Do you want speed, quality, or low cost? You can afford only two of the three. Efficiency is a balance of all three. … A system needs to have efficiency built in, because if it uses too many resources, it can’t survive. But winning isn’t just about efficiency.”
What if you did not have to make that trade-off?
What if you could be efficient AND resilient, innovative and responsive?
What if you could be efficient and effective?
A perfect balance of both is right for customers, your company, and employees.
Effectiveness is the new efficiency.
Effectiveness is productivity that is valued, advantageous and compelling. Productivity that customers, employees and shareholders can get behind. Work that is meaningful for employees, important to customers and rich in shareholder value. Effectiveness is the human side of efficiency. Effectiveness presumes employees are more than a cost. Their potential and capacity for growth make them a valuable, renewable resource. Unlike machines.
Effectiveness is the customer and employee need.
Effectiveness drives value by understanding and satisfying customer needs. Effectiveness creates a competitive advantage through differentiation and innovation. Effectiveness fosters compelling value propositions and experiences. Effectiveness only humans can deliver.
It is not an either/or choice. Here are three immediate changes you can make to your company’s efficiency/effectiveness equation to improve efficiency and the quality of work.
1. Add Slack
It sounds counter-intuitive. Roger Martin writes that we are trained to take time out of our systems and processes and reduce tasks to lower skill levels so we pay less for these skills while increasing efficiency. Balance your efficiency equation by adding slack for professional development, customer service excellence and time to think, ask questions and contribute to solutions. It will improve value, competitive advantage and efficiency by getting more done, better.
2. Invest Differently
Asset maintenance and labour are two costs we seek to minimize. Assets such as machinery decline and depreciate over time. People do not. Sure, we age. But, we also acquire experience and skill as we do. Invest in human potential versus more machine capacity and your return on productivity, capacity for innovation and resilience will grow.
3. Create Friction
Healthy friction. We have been taught to remove any friction that impedes speed. But, as Martin Lindstrom writes as our companies grow and age they often lose their empathy and add rules and processes that do not work for the people doing the work. How can that be efficient?
Create healthy friction in your company by being a place where rules, systems, workflows and processes are questioned, challenged and ultimately made better. Your company will be less fragile and more resilient when facing the market shocks of change. Efficiency only requires a tradeoff. Trade up to a balance of efficiency and effectiveness. Your customers, shareholders and employees will thank you.